Microsoft goes after the iPhone

Microsoft coyly said yesterday that it is "not unreasonable" for the company to introduce a mobile phone combined with features of its Zune digital music player to compete with Apple Inc.'s iPhone.

The Zune phone, a topic of speculation for months since Microsoft introduced its first digital music player last year, could be driven by consumer demand for one multimedia device to make phone calls, play music and take pictures.

To date, the focus of Microsoft's mobile phone business has been providing its Windows Mobile software to handset manufacturers, but the company said an integrated business model of making both device and software could make sense.

"It wouldn't be unreasonable to think at some point there might some integrated thing," Mindy Mount, chief financial officer of Microsoft's entertainment and devices division, told investors at Citigroup's global technology conference.

Microsoft has sent mixed signals about the Zune phone. At the time it introduced the Zune last year, the company said a Zune phone was definitely part of its future plans.

Earlier this year, CEO Steve Ballmer said at a CEO forum that the Zune phone is not a concept that Microsoft would ever pursue. But he then said it could easily add music or gaming functionality to its Windows Mobile platform.

Windows Mobile is one of Microsoft's fastest growing businesses with license sales expected to nearly double this fiscal year to more than 20 million copies.

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